Airing between regular episodes of the VinePair Podcast, “Next Round” explores the ideas and innovations that are helping drinks businesses adapt in a time of unprecedented change. As the coronavirus crisis continues and new challenges arise, VP Pro is in your corner, supporting the drinks community for all the rounds to come. If you have a story or perspective to share, email us at [email protected].
In this episode of “Next Round,” host Zach Geballe sits down with Josh Jacobs of Speakeasy Co., a new e-commerce and fulfillment platform for alcohol brands. While many craft producers and distilleries have struggled to get their products out to consumers in the past, Speakeasy Co. presents a new direct-to-consumer solution for interesting spirits brands. Jacobs mentions some of the brands his platform works with, and insists Speakeasy Co. looks for emerging brands that are innovators willing to push the envelope and trailblaze.
Many smaller spirits brands have been limited in the past by the three-tier system, the standardized system by which alcohol is distributed. The distilleries and producers are the first tier, distributors the second, and retailers the third. Speakeasy Co. allows spirits brands to engage with their consumers and own their growth without relying on the second and third tiers. It also helps brands create and integrate their own e-stores into their websites and track data analytics they wouldn’t be able to access through other retailers like Drizly. From there, Speakeasy Co. handles all the warehousing and order fulfillment for the brands, so consumers can receive each order in a matter of days.
Jacobs discusses the huge growth that Covid has brought to Speakeasy Co. and how he hopes to help different brands expand their offerings. With some craft distilleries hoping to couple their spirits with virtual tours or the perfect picnic setup, the brand has plenty of exciting things in store for 2021.
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Zach: From Seattle, Washington I’m Zach Geballe. And this is a “Next Round” VinePair Podcast conversation. We’re bringing you these conversations in between our regular podcast episodes to focus on the issues and stories that are going on in the drinks world today. And right now, I’m speaking with Josh Jacobs. He’s the co-founder and CEO of Speakeasy Co. Josh, thanks so much for your time.
Josh: Thanks for having me, Zach.
Z: So let’s start with hopefully a relatively straightforward question, which is what is Speakeasy Co.?
J: Zach, you should know by now, nothing is straightforward in the alcohol industry. The most succinct way to describe our services is as an e-commerce and fulfillment platform.
Z: OK, maybe let’s unpack that a little bit more. So maybe we can look at this through the lens of, what are some producers that you work with, and what is it that you do for them?
J: Yeah, absolutely. So a couple brands that we work with today would include 10th Mountain Whiskey in Vail, Colo., Horse Soldier Bourbon, and a lot of craft and emerging brands at the present. And in the alcohol industry, there is a major challenge for the brands, for the suppliers, since they’re so far removed from the end customer transaction in a bar or restaurant or liquor store. All they have is their bottle and label on a shelf, or name on a menu, which is not a heck of a lot of real estate to engage with consumers. And our platform is all about empowering the suppliers, empowering these brands to own their own growth and own their own relationship with customers for the first time in the alcohol industry.
Z: And I wonder, we’ll get more into this in a little bit — I have a couple of other questions maybe before it. But just one thing you said right there that sticks out to me is, I know lots of people in the craft distilling space throughout the country. And for a lot of them, the natural point of discovery was the bar, was the restaurant, because that’s a place where being on the shelf alongside familiar brands can be a point of distinction. Hopefully, the bartender or the staff of the establishment know a little bit about the product, or at least getting that information in their hands is possible. Obviously, 2020 and into 2021 has been a difficult time for anyone who relies on discovery through restaurants and bars. So how has this period of time during the pandemic, has it made it all the more imperative for some of these brands to have another way to connect with potential consumers?
J: You are absolutely right, Zach. The craft emerging players are disproportionately reliant upon not only bars and restaurants, but even just their tasting rooms for the distilleries that are producing their own goods as well. And so virtually overnight, with lockdown and quarantine, these brands lost 70 to 80 percent of their business, and unfortunately, were forced to find and innovate new solutions to survive the pandemic. And at first, Zach, I was almost a little guilty with the rush of inbound activity. But fortunately, in working with all of these partners that have come on board over the past 12 months and even more recently, we’ve opened up their eyes to a whole new digital world. And it’s no longer just a short-term solution to bridge the gap to getting the vaccine, which hopefully is only a few more months away. But it’s a long-term solution to differentiate and thrive.
Z: Yeah, and I think that’s a really important thing that I’m going to say right now. And I think you can also elaborate on something that some listeners might not realize totally or might not understand is that if you are a distillery in particular, working with distilled spirits, it can be really, really difficult to get your product in the hands of a consumer — especially a consumer who’s not in the same state as you. Shipping spirits between states typically requires either working as a part of the three-tier system, or there are certain states that permit it. But it’s a little bit more constrained. And I’m curious if one thing that you’ve heard — I mentioned before on the set of producers that during this period of lockdown in the pandemic, obviously they’ve needed to find a way to connect with their audience. But I assume you also, to some extent, hear from consumers who have seen access to products that they really like kind of cut off as well. Is that something that you’re seeing?
J: We are seeing that, absolutely. And you hit on one of the biggest pain points, which I just want to piggyback off of and then go back to your question around the three-tier system, and a point that I perhaps didn’t drive home. Not only do these brands only have their bottle label on a shelf and name on a menu, as I mentioned earlier — but that’s all they have. Because of the three-tier system, for the most part, brands do not have the ability to sell direct-to-consumer. They’re forced to go through the three tiers: a distributor, the second tier bar, restaurant, liquor stores, the third tier. So they really haven’t had a heck of a lot of options outside of the traditional distribution, the traditional offerings. And thus, digital is an entirely new world. And the ability to own the customer and own their own growth is a revolutionary step for the alcohol industry. And it’s not just about the brands, going back to your point Zach, it’s really about the consumers. We’ve seen it in craft beer, how craft beer has exploded over the last decade and it’s now somewhere around 20 to 30 percent of overall beer sales. But the most recent statistic produced by the ADI (American Distilling Institute), I believe it was, showed that overall, craft spirit sales is only around 3 percent. And based on surveying, we know consumers want to shop craft and local, and “unique” is really a problem of reach. And so consumers have definitely complained about not being able to have access to their products and also not being able to access them conveniently, which is another area we’re trying to tackle with delivery direct to the doorstep.
Z: I want to come to the delivery piece in a moment because I think that’s also, of course, an important thing. But I want to, I just want to ask a question that’s maybe not technical, but is a little more specific to the platform, which is I think some people, if they’re thinking about trying to get their hands on a craft spirit online, they might be tempted to look at an online retailer or look at something in that vein. And my sense is that, my understanding is that with Speakeasy, you’re more on the brand, or on the distillery site, not a separate repository of a separate sales platform. Am I describing it correctly? Is that right? Or can you explain a little bit more how that works?
J: You are accurate, and this is a major competitive advantage and just a major differentiator between the other digital solutions that have existed in the marketplace previously. So the notable digital names in the alcohol space would be a Drizly, for example, but the challenge is, Drizly is their own brand. And they want to amass their own following. And so if you’re a brand, you have no ability to sell direct-to-consumer. You have to go through the second and the third tier. But one innovative strategy that we’ve seen over the past couple of years is for the suppliers, for the brands to run Facebook and Instagram and other digital advertising, and then they drive traffic to a Drizzly, for example. So they have a little bit more control over reaching consumers and driving them to an app or a medium to check out. But the challenge is Drizly is their own company. If they acquire a new customer from a brand, they’re not interested in sharing that data back. They are all of a sudden going to re-market to that consumer with not just the latest product that was purchased, but all of the products in the Drizly portfolio. So as a brand, it’s not the most scalable solution to drive traffic to another marketplace. And so the Speakeasy model, it’s a white-label, integrated shopping cart. So the suppliers have control over the customer’s journey and that user experience from end to end. And there’s no clunky handoff to another company or another marketplace and there are no other distractions of other brands or competitors. And this also provides them the opportunity to have access to e-commerce tools such as cart abandonment emails and Facebook ads and Google analytics. These are tools that are essential for scaling an e-commerce business that haven’t been feasible with previous relationships.
Z: Gotcha. So now let’s talk about it again from the consumer perspective, because obviously, some of our listeners here are going to be people who might be on the producer side, but a lot of our listeners are on the consumption side more so. So what is the experience like for someone who orders a bottle of whatever, whiskey, gin, whatever your spirit, what is that experience from checkout to delivery?
J: And what’s so unique as we were just talking about is it really feels like a branded experience from the consumer’s perspective. That they receive an ad or, for whatever reason, are driven to a brand’s website. And then they never leave that brand’s website. They click purchase, as you would from a non-alcohol company selling hats and T-shirts, for example, and purchase that product directly on that brand’s website. And then the order confirmation email that they receive has the logo and the branding for that specific supplier. And same with the order tracking and the packing slip that’s within the box. And then for our partners that are also selling merchandise, it might come with that brand’s hat or T-shirt as well. And so Speakeasy is intentionally in the background. We’re trying to empower these brands to run their own companies. And we’re just the arbiters of the ecosystem and the glue that binds it all together.
Z: Gotcha. And so obviously, there’s going to be a lot of variability in this question, but what is the typical time span from when someone places an order to when they can expect to get a bottle or bottles of spirit?
J: This has been one of the top priorities for Speakeasy over the past 12 months as we’ve experienced pretty explosive growth. And I will say that back in 2020, maybe 12 months ago, even maybe eight months ago, it could have been as long as two to three weeks to get product on the East Coast, but I’m really excited to share that we’ve gotten that down to competitive FedEx and UPS ground rates, maybe around six business days at a max anywhere in the country.
Z: Gotcha. So let’s talk a little bit about some of the distilleries that you partner with. What is it that they might have in common? I mean, obviously they produce different kinds of spirits, different styles or in different parts of the country. But what are some of the things that kind of unite them and make them good brand partners?
J: It’s a great question, Zach. And there are definitely trends that we’re seeing around price points and the type of product. I think a lot of that might be correlation and just with overall trends in the industry. But if I were to pinpoint one pattern amongst our partners, they’re innovators, they’re early adopters, and they are willing to push the envelope and trailblaze. So we’re not seeing every company jump into this headfirst. We’re having conversations on a daily basis. And the ones that move forward, they’re the ones that see the opportunity right now to get their product to more consumers faster and more easily than ever before. And some of them don’t have a fully fleshed out plan, but they’re willing to take that leap of faith because they see the potential, and they’re willing to figure it out on the fly. Other brands we connect with, they’ve been seeking the solution like this for years. They just couldn’t necessarily map it out in their own head to start a company. And now that they found us, their eyes light up, and they’re saying we are their saving grace, which is incredibly exciting to hear from someone that you’re pitching to. But we’re seeing that everyone we’re working with they’re willing to help drive the industry into the digital age, which is a complete paradigm shift away from the 90-year-old model that we’ve been working on.
Z: Yeah, and speaking of that model, we’ve gone through an interesting period of time in this country over the last 10 months or so, obviously with the pandemic and understanding its massive effects everywhere. But one area that I think has become clear and we talked about this a little bit ago, about how it’s created a recognition on all sides that being able to get product delivered at home is really important. And yet, weirdly, for beverage alcohol and spirits in particular, it’s much, much harder to get that than almost anything else that you want to get delivered at home. And I’m wondering if one of the things that you’re looking at is not just bottles of spirits, say, but is there any talk about premixed cocktails? Things like that? Is that something that fits into the business model, or is it still kind of just, here’s a bottle of gin?
J: Really like where you’re coming from, Zach, and we encourage our partners to think of ways to offer something online that’s not available in the store. So we talked about at the beginning that a lot of the brands we work with, a major challenge for them is reach. They’re just not available in many places. But for the brands that have widespread distribution or are available in a lot of markets, there’s still a ton of value online. And one of the major strategies is to offer something unique. Maybe a cocktail kit, and so that could be glasses, and it could be bitters and some other tinctures to whip up a curated cocktail produced by that specific partner, that specific brand. So we love that idea. We don’t have a ton of partners right now offering much outside of merchandise, but there’s a heck of a lot of interest in customization and offering really unique bundles. I will say we’re trying to stay away from perishable items, though.
Z: Of course. Yeah. And I wonder, too, along those lines, maybe not so much about delivering just products or even merchandise, but experiences. Is that something, too, that is a part of the conversation? I mean, I get that, to some extent, any platform has to know what its niche is and can’t try and do everything. Another story that I’ve heard certainly from the producer side is what’s been vital for them during this period when having people into a tasting room or a bar is not really feasible or is limited, or a lot of people are sort of understandably dubious, having experiential connections is important. Is that something that you are part of it all, or just is not really under your purview at the moment?
J: You’re hired, Zach! Love all of your ideas. Nothing fully fleshed out presently, but we have a lot of creative, innovative partners, as we were just highlighting a moment ago. And we’ve seen distilleries shift from in-person tours to virtual tours. But what’s the one thing missing from a virtual tour? The product, itself. So this could be a way to mix virtual and physical experiences. Send a bottle, doesn’t have to necessarily be fancy, but then you have a couple of days later the virtual tour that you’re signed up for, and you sample the different products, and you compare and contrast the tasting notes. So that’s one element, and then a purely physical experience. We do have partners playing around with ideas like Man Crates and also maybe virtual happy hours, and everyone gets the same box, all of their friends or family, and they drink the same beverage. And then they also, on top of that, have a game that they can play together and share together. We also have a brand that we’re chatting with that’s interested in sending out dinner kits, so it’d be the bottle of alcohol, and they would come with a fancy tablecloth and everything you need for a fancy meal at home. We have another one that’s doing picnics. So we have all these different variations that are a ton of fun. And again, it’s about offering something that you can’t get in the store, either.
Z: Excellent. Well, Josh, thank you so much for your time. Really interested to see how this platform continues to grow. While as you mentioned before, there’s this incredible need for this point of connection for smaller distilleries and consumers in this moment, I don’t think that people are going to suddenly stop wanting to get things delivered to their door. I know that I think that for all of us, for those who weren’t necessarily already in that world already, it’s been a definite change that 2020 and 2021 have brought. So, again, thank you so much. I really appreciate the time and the insight, and we’ll look forward to seeing what happens with Speakeasy down the road.
J: It’s going to be a fun year, Zach. Really appreciate you having me. Looking forward to coming back on.
Thanks so much for listening to the VinePair podcast. If you enjoy listening to us every week, please leave us a review or rating on iTunes, Spotify, or wherever it is that you get your podcasts. It really helps everyone else discover the show. Now for the credits. VinePair is produced by myself and Zach Geballe. It is also mixed and edited by him. Yeah. Zach, we know you do a lot. I’d also like to thank the entire VinePair team, including my co-founder Josh and our associate editor, Cat Wolinski. Thanks so much for listening. See you next week.
Ed. note: This episode has been edited for length and clarity
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